When a perpetual inventory system is used:
A) Cost of goods sold is not a residual amount and its amount essentially is verifiable in the inventory records.
B) Goods out on consignment are removed from inventory.
C) There is apt to be less inventory control than when a periodic inventory system is used.
D) One journal entry is made at the time merchandise is sold.

Question

Quizplus · Accepted Answer

A perpetual inventory system continuously updates inventory records, allowing for an accurate and verifiable cost of goods sold.

Answer: B
 In a perpetual inventory system, goods out on consignment would be removed from inventory to accurately reflect the quantity and value of goods on hand.

Answer: D
 With a perpetual inventory system, a journal entry is made at the time merchandise is sold to update the inventory records and record the cost of goods sold.

Therefore, the best choices are A, B, and D. Choice C is incorrect as a perpetual inventory system typically provides better inventory control than a periodic inventory system.

When a Perpetual Inventory System Is Used